Issue 188 – THE DELAIRE REPORT

09 September, 2015

Gold prices began this week on a slightly negative note as prices drifted back towards their lowest levels since mid-August after US payrolls data failed to provide clarity on the timing of a US Federal Reserve rate hike, and as the dollar steadied against other majors. .

The U.S. unemployment rate hit 5.1%, the lowest in 7 years but hiring slowed. The unemployment rate fell from 5.3% in July to its lowest point since 2008 and is now at a level Fed officials say is consistent with a healthy economy. But employers added a moderate 173,000 jobs in August, the fewest in five months.

Despite concerns about the Fed tightening, gold recorded its best month this year, gaining around, gaining about 3.4% for August for its first advance since May.

During the same period, global stocks suffered losses and the S&P 500 experienced its worst monthly performance since 2012, while the Dow had its worst month since May 2010.

Both the S&P and the Dow had five days of gains or losses of more than 2% in August, making it the most volatile month in nearly four years. Each major index ended the month down more than 6%.

Traders still remain fixated on a potential interest rate hike from the Fed.Despite the persistence of ambiguous economic data as well as rhetoric from central bankers, and barring further turmoil in the financial markets, many market participants believe that the Fed is still on schedule to hike interest rate this year. While only 30% believe such a move will occur in September, many think the chances for a hike in October seem rather strong.

As I have stated before, I am amazed at the attention this potential rate hike has been given. Whether it comes in October, November, December or next year, it will be a very small increase and it will not have a major impact on the fundamentals which are going to drive the markets.

People are also waiting to see what’s going on in China. That and the interest rate decision will be the most important factors for the gold price over the next days and weeks.

As expected, the European Central Bank did not ease policy when its governing council met last week. However, the ECB underlined its determination to take further measures, if necessary, to get inflation, currently just 0.2%, back to the goal of nearly 2%. Speaking at the press conference after the meeting, Mario Draghi, the ECB’s president, stressed the council’s willingness, readiness and capacity to act.

Today’s global economy is so utterly dependent on the latest move by a major central bank, or even the latest utterance of any semi-important monetary official, it is simply ridiculous. There are no free markets anymore. It seems that real fundamental driving forces no longer apply and only hints about the next big monetary policy decision are of more importance. This obsession with “monetary policy” which tends to mislead people into what is really going on in the global economies will have no relevance once the financial system collapses. No doubt, when it happens, main-stream media will put the blame on China or Russia.

It is very clear that the massive money printing experiment we have seen from central banks over the years has done nothing to stimulate economies. Global economies are under pressure and several major world economies are slipping into recession.
It is obvious that China is in a major economic downturn. Stocks there have been plummeting, despite desperate attempts by the government to rig the markets.

China is the world’s largest commodity consumer. In the first quarter, its economy grew at its slowest rate in 25 years. And there are signs that things could get much worse. Last month, China’s manufacturing output index had its lowest reading since 2009.
Demand for commodities in China including oil, copper, aluminium, iron ore, and coal is down substantially.

In Canada, the economy contracted in the second quarter by 0.8% after going down by 0.5% in the first quarter. So if you define a recession as two consecutive quarters of negative growth, then Canada officially entered a recession on Monday.
Brazil is in its worst economic downturn since the 2008 financial crisis.

The country’s stock exchange has fallen 26% over the past year. The Brazilian real has plummeted 36% against the US dollar in the past year, too.

Australia could be headed for its first recession in twenty-five years. Last quarter, Australia’s economy barely grew. Its GDP growth was just 0.2%…less than half of what economists expected. And the Australian dollar has plummeted 22% against the USD since last September.

Australia is facing the same problems as Canada and Brazil…low demand for commodities. Australia is the world’s largest iron exporter. It’s also the world’s biggest coal exporter. The price of coal is down 40% since 2011.

In South Africa, the Rand has plummeted to new low against the major currencies. South Africa is facing numerous serious challenges now. It has one of the most corrupt governments in the world, unemployment is ridiculously high, there is a problem with the power grid, crime is out of control, and labour unions continue to cripple the economy.

It is apparent that the last six years of zero bound interest rates combined with unprecedented money printing, has done nothing to stimulate economies. It has merely propped up global stock and bond markets while destroying the wealth of hard working individuals whose savings have been destroyed.

Currently, there is talk of a financial meltdown beginning this month. While many of these predictions are based on Biblical interpretations which I ignore, some are based on the unfolding market events which suggest that something big is indeed unfolding.
According to Jonathan Cahn a Rabbi, we are currently living in a Shemitah year and as predicted our finances are already going haywire. The Shemitah Year will conclude September 13th and then we will enter the impact month (September 14-October 13th) known as the month of Tishrei, and according to Jonathan Cahn a peaking point.

This coincides with the 50 year Jubilee cycle, and will result in a devastating crash cycle low in 2016.Some other prophecies are suggesting that we will see a stock market meltdown next year – not in September or October of this year as some are predicting.

In another video presentation, well-known market analyst, Larry Edelson suggests that three of the most powerful, most destructive forces in the economic universe are set to converge on October 7, 2015.

According to Edelson, the results will be far worse than 2008. The Dow’s recent 2,000 point plunge was just a taste of what’s ahead. No man’s life, liberty or property will be safe, and all hell is about to break loose.

According to Mike Larson, on Wednesday, September 16, 2015 … behind closed doors in Washington, D.C. … an event could take place that will change everything in your life.

Then, there is talk that there will be chaos on September 28 on the occasion of the fourth blood moon.

On May 22 Lindsey Williams stated that there will be a major global currency reset within a three month period or less. This means that this should already have happened before the end of August. So far he has not been correct.

While, I am not judging anyone or their beliefs, since 1979 when I began in this business, I have seen many of these types of predictions. Yet, in all these years, I have yet to see ONE actually come true.

I suppose we will just have to wait and see. But, in the meantime I suggest you add physical gold and silver to your investment portfolios.

Over recent weeks, there has been something going on in the silver market.

Silver bullion for retail investors seems to be in short supply. The enormous surge in demand has put mints and refiners terribly behind. After two months of high retail demand, they are still unable to catch up… in fact, they’re falling even more behind. That’s why silver coin premiums rose again last week, and shipping delays lengthened.

The lack of availability in silver coins, rounds, and 5, 10 and 100-ounce bars, along with higher premiums, are making it more difficult for silver investors to capitalize on today’s low spot prices.

Recently, Lakeshore Trading struggled to obtain any one ounce bars. And, it seems that the one ounce Johnson Matthey bar may be discontinued by the new owners Asahi of Japan.

According to GFMS Thomson Reuters (GFMS), the precious metals consultancy, demand for silver jewellery and industrial applications increased through the first half of the year. In the United States, imports of silver jewellery jumped 11% through the end of May. The United States is the largest importer of silver jewellery, measured in dollar terms, and this demand impacts silver trade across Asia.

On the investment side, retail investor demand for silver has been sturdy in the first half of 2015, in a challenging precious metals investment market. Through July 24, global silver ETF holdings increased by over 4.7 million ounces in 2015, suggesting that investors have a more positive longer-term view of the silver price. In the first half of the year, global bullion coin sales totalled 43.6 million ounces, 6 percent below levels seen in the same period a year ago. However, first half 2015 global sales were the fifth highest on record. The U.S. Mint, faced with a significant spike in investor interest, temporarily suspended sales of its silver bullion coins on July 7 after exhausting its inventory when investor demand in June surged 80% above the previous year’s June coin sales. The Mint resumed bullion coin sales on July 27 on an allocated basis. Similarly, Australia’s Perth Mint saw its silver coins sales spike in June due to a more attractive silver price, although sales overall are down 18 percent from the same period in 2014.

Meanwhile demand for physical silver from India continues to impress. From 2005 through 2013 India silver imports averaged just under 100 million (mn) ounces per year. In 2014, on the back of substantial restrictions put on gold use and the sharp drop in the silver price, India silver imports jumped to 230 mn ounces. With the election of Mr. Modi and some easing of the gold restrictions, silver use in India was generally expected to decline in 2015. But this has not been the case, as of the end of May. The latest data through April show India silver imports running about 30% above the 2014 record pace, on track for about 300 mn ounces of imports in 2015.

India imports alone are on pace to consume about 1/3 of total global silver supply available in 2015. The rapid pace of India imports is likely to subside but indications of strong demand for silver are clear.
The UK’s Royal Mint recently launched sales of the British Britannia in the U.S. The timing was excellent, as the U.S. market badly needs additional supply.

The Britannia is denominated at 2 pounds sterling. And at 1 troy ounce of .999 fine silver, the silver content is identical to the American Eagle.

With the gold/silver ratio sitting at extreme highs, currently at 77, now looks like a great time to favour silver. Unfortunately, market conditions mean it may be more difficult and expensive to do so.

About the author

David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. Rand Refineries, the largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.